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A year after the Government opened the multi-brand retail sector to foreign direct investment, global players are still to act on their India plan, as amendments to the Foreign Exchange Management Act (FEMA) are yet to be formalised.
While the Government is yet to receive any application to start multi-brand retail trade in India from foreign investors, it has received about 70 applications so far in single brand.
A big factor weighing on the minds of potential investors is the failure of the UPA Government to get the Rajya Sabha’s consent for the amendments brought about in the FEMA, say analysts and officials.
New FDI rules
The FEMA Amendments have been carried out by the Reserve Bank of India to bring it in sync with the new FDI rules that allow 51 per cent foreign investment in multi-brand retail.
Several global players are understood to have expressed concern on the same as an amendment to FEMA is required, duly approved by both Houses of Parliament, if they need to send profits to the parent firms.
“Yes, there is an element of uncertainty surrounding the FEMA Amendments. A number of global players who had expressed interest in the Indian market are waiting and watching to see how things unfold on the FEMA front. The serious ones, however, are deliberating on other aspects of the policy while waiting for Parliamentary consent,” a DIPP official told Business Line .
While the FEMA allows RBI to amend rules to provide for FDI in retail, it specifies that all rules and regulations made under this Act should be laid for consideration in each House of Parliament as soon as possible.
Once the amendments are placed before the Parliament, members decide whether it should be annulled or amended.
Any motion against it has to be put to vote within 30 working days.
While three Rajya Sabha MPs, Sitaram Yechury (CPM), Achuthan (CPI) and Prakash Javadekar (BJP), had moved motions against the amendment, it could not be debated or voted in Parliament in its last session because of time constraints.
Fresh amendments
Now that the RBI has come up with fresh FEMA amendments in line with the relaxations in FDI policy; these too have to be placed before Parliament.
A foreign retailer, on conditions of anonymity said that it was watching the policy developments very closely and would move its application only after the general elections. “There is no clarity on regulations and even after the multi-brand retail sector has been opened up for foreign investors, the policy continues to be restrictive. We will watch before investing,” the retailer said.
Analysts tracking the sector say that it was important for the Government to get the FEMA amendments passed in Parliament to gain investors’ confidence. “It is a matter of concern for companies. Unless the amended FEMA is passed, foreign companies cannot repatriate their profits to their global chain,” Arpita Mukerjee of ICRIER, said.
“We continue to review the guidelines and work with the Government and interested stakeholders to create conditions that enable foreign direct investment in multi-brand retail,” said a Walmart spokesperson.
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